Draft IFRIC Interpretation—Uncertainty over Income Tax Treatments

Proposed changes: Draft IFRIC Interpretation

Draft IFRIC Interpretation—Uncertainty over Income Tax Treatments

The IFRS Interpretations Committee published the draft Interpretation to provide guidance when there is uncertainty over income tax treatments.

The Interpretations Committee was asked when the recognition of a current tax asset is appropriate if tax laws require an entity to make an immediate payment in respect of a disputed amount.

The Interpretations Committee noted that IAS 12 Income Taxes provides guidance on recognition in such a situation. However, it observed diversity in practice for various issues in circumstances in which there is uncertainty in the application of the tax law.

IAS 12 provides requirements on the recognition and measurement of current or deferred tax liabilities or assets, but does not provide specific guidance for how uncertainty about a tax treatment should be reflected in the accounting for income tax. Consequently, the Interpretations Committee proposes an Interpretation to propose that guidance.

The proposed draft Interpretation was published in October 2015. The comment period ended on 19 January 2016.

The Interpretations Committee discussed the feedback on the draft Interpretation at its meeting in September 2016. At this meeting the Interpretations Committee decided to proceed with the Interpretation, subject to some clarifying amendments. In addition the Interpretations Committee decided to provide first-time adopters of IFRS Standards the same transition relief available to existing preparers.

The Interpretations Committee noted that the Interpretations would not explicitly address interest and penalties related to uncertain tax positions. The Interpretations Committee concluded that it has completed the necessary due process steps in November 2016.

In addition the requirements for interest and penalties would be considered separately at a future meeting.